the PARALLEL IMPORTS

Economic communities operate on the principle of free movement of goods amongst member states. Although it must still conform to certain regulations, the marketing of medicines does not escape this elementary rule basic to common markets.

The consequence is that an intermediate wholesaler, independent from the manufacturer, has the possibility to purchase medicines in a neighbouring country which sells them at a cheaper price and then to resell them in his own country of origin.

Even when it is legalized as is the case for the European Union, this so-called practice of parallel import is not without its problems with regard to the fight against counterfeit drugs. In Europe, parallel imports have been sources of health concerns for a long time. The emblematic measures defined in the European Directives are designed to secure this practice by setting it within an increasingly rigorous framework.

Parallel imports are defined as a process to introduce an authentic brand product into a market through other distribution channels than those authorized by the manufacturer.

As such, the problem of parallel imports concerns not just the European Union, or just the producers of specialised pharmaceutical goods: it concerns all brand owners.

In this context, the issue raises questions well beyond those involved in trademark concerns: it questions the merit of the free movement of medicines against the health safety of 27 countries and approximately 500 million inhabitants.

This page is not intended to give an exhaustive list of the measures taken by all the major economic communities, customs unions or free trade areas (Mercosur, the African Economic and Monetary Community, the Golf Cooperation Council, etc.) to regulate the practice of parallel imports of medicines.

It will focus on describing the various aspects of the problem as it appears within the European Community and the means with which the European institutions are gradually trying to respond.

1. The principle of the parallel import of medicines in the European Union

According to the European Commission, “The parallel import of a medicinal product involves importing the product into one Member State from another and then distributing it outside the distribution network set up by the manufacturer or his/her authorised distributor”.

This commercial practice is legalized in the Community market in virtue of the principle of the free movement of goods. It was recognized by the European Court of Justice as early as 1976.

This import does not require the prior agreement of the manufacturer.

For importing wholesalers, the main interest of these purchases concluded outside the official supply lines (hence the qualifier of “parallel”) lies in being able to take advantage of price differences from one country to another within the European Union. Indeed, drug prices are set freely by national Governments to control their health spending. Distributors can buy low-priced medicines in one state for resale in another where the price is higher.

2. A common practice

In the countries of the European Community, the price of a medicinal product can vary by 20 to 50% from one country to the other according to public policies.

Such variations are likely to stimulate the practice of parallel marketing in countries where drugs are traditionally more expensive.

The European Commission also said that “the volume of parallel imports of proprietary medicinal products within the European Union is significant”. In 2007, this trade was valued at 5 billion euros (IMS Health)

According to the International Pharmaceutical Federation (FIP), this commercial practice allows a trader to earn a margin of at least 10-15%.

3. Restrictions are possible, but are very limited and therefore rare

Parallel imports may be restricted in some specific cases: when they jeopardize the protection of human health and life, or the protection of industrial and commercial property.

Yet, Article 30 of the Treaty of Rome states that “prohibitions or restrictions shall not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States”.

Member States are thus obliged to justify to the European Commission any refusal on their part to allow a product from another member state to enter their market. A judgment of the Court of Justice of the European Community also points out that such measures of restriction must be “proportionate and necessary”. (Case Adriaan de Peijper, ECJ, C-104/75, May 20, 1976).

For these reasons, restrictions are very rare.

4. Simplified procedures to facilitate parallel imports

A drug can be imported by an authorized pharmaceutical institution on the basis of a parallel import authorization (PIA) or a license to import. These documents are awarded by the national health authorities following a simplified procedure.

In the case where a drug has been approved at the European level via a procedure centralized by the EMA (European Medicines Agency), no PIA or special license is issued. EMA will mark its approval via a “letter” after reviewing the product information mentioned on the packaging and in the instructions for use.

According to the European Commission, “this simplified procedure for parallel imports is justified by the fact that the product in question has already received an authorization to be put on the market (AMM) based on complete technical information.”

In order to fall under the simplified procedure, the drug imported in parallel must meet two conditions:

it must have received a marketing authorization in the Member State of origin;
it should be sufficiently similar to a product which has already received a marketing authorization in the Member State of destination.

The similarity between two pharmaceutical products is considered sufficient when the two products are manufactured according to the same formulation, with the same active ingredient and for the same therapeutic effects. In addition, a drug imported in parallel can be distributed according to the simplified procedure even if “the like product from which it draws its license is no longer available on the market, provided that public health requirements are met.”

5. Problems raised in the context of the fight against counterfeit medicines

In the fight against counterfeit drugs, parallel imports, as practiced today within the European Union, pose the following problems:

Breaking with the traditional distribution pattern (drug manufacturer/ wholesaler/pharmacy), parallel imports give rise to the emergence of new and sometimes very numerous players (buyers, “repackaging” agents, transporters, etc.).

This multiplication of intermediaries undermines the security of the distribution chain and increases the opportunity for counterfeiters to introduce their falsified goods into the system by a factor of ten.

The complexity and lack of legibility and transparency of these parallel supply systems make their control more difficult.

5.2 – Systematic repackaging

To add to this new complexity, the parallel import of medicines raises another problem linked to the systematic repackaging of drugs.

Indeed, a drug imported through the manufacturer’s direct distribution channel retains its original packaging. This packaging has previously been adapted to the market for which the product is intended. However, in the case of a medicinal product imported in parallel, the product must be repackaged to make it conform with the national legislation of the importing country, particularly concerning language.

Such reprocessing operations may simply be limited to affixing additional labels on the original packaging and to inserting new instructions for use in the language of the country of importation, but these operations may also induce a complete change in the packaging and the creation of a new package to the exact replica of the original.

Among other health risks (confusion or errors in the instructions and packaging, added difficulty in the recall of batches, non-compliance with the conditions of conservation, etc.), the repackaging process goes against the interests of the importing country in their fight against counterfeit drugs for several reasons:

It increases the possibilities of the substitution of genuine drugs with fake drugs;
It is incompatible with the visual authentication and inviolability devices put in place by the manufacturers (see “technological tools” page);
In the absence of harmonized systems between importing and exporting countries, it undermines the traceability of the drug.

For example, some parallel importers renumber the batches during the drug repackaging operation. This leads to the presence of different numbers on the primary and secondary packaging.

Moreover, to meet some countries’ requirements to match the number of units in the package with the indicated dosage for the equivalent, national, AMM-authorised product, some importers occasionally cut away blisters to reduce the number of units contained in the packages.

Finally, what becomes of the original drug packaging? Is it systematically destroyed in a securely monitored process in order to ensure that it cannot be refilled with fake medicines and reintroduced on the market?

In the absence of such guarantees, the repackaging is likely to facilitate the work of counterfeiters. The drug industry and its representatives have repeatedly expressed their concerns about such practices and about the development of the repackaging activity by third parties in general.

5.3 – The 2011/62/EC Directive on “fake drugs”- a framework for parallel imports

To meet these major challenges, the European Commission and EFPIA have long put the issue of parallel trade in medicines at the heart of their considerations.

In 2006, the Commission launched a study on parallel trade in medicines in Europe. The first results, published in January 2008, confirmed the significant risks to the safety of patients for the reasons mentioned above.

As a result, new provisions on parallel imports of medicines were integrated in the 2011/62/EU Directive known as the “fake drugs” Directive (published in the OJ of the EU on July 1, 2011).

These measures provide for stricter control of repackaging activities. Parallel importers should now not only verify the authenticity and the integrity of the product, but also affix a safety device “equivalent” to the original.

This new provision complements the authorizing conditions governing imported drug repackaging operations as defined by various judgments of the European Union Court of Justice:

the original state of the product must not be affected by the reconditioning process;
the name of the manufacturer and the author of the repackaging must be indicated on the new packaging;
the presentation of the repackaged product must not damage the reputation of the brand and its owner;
and, finally, the parallel importer must inform the owner of the mark in writing of his/her intention to market the product in the country of importation and to provide a specimen of the repackaged product.

The Directive also reiterates that:

The parallel importer must inform the owner of the mark in writing of his/her intention to market the product in the country of importation and to provide a specimen of the repackaged product.
Holders of manufacturing authorizations who repackage drugs should be held responsible for any prejudice caused.
Distributers should check that their wholesale suppliers hold the necessary licenses for wholesale distribution.
A list of the wholesalers whose compliance with the legislation of the Union has been officially established after due inspection by a competent authority of a member state should be published in a future European data bank.
The provisions relating to the inspection and control of all actors involved in the manufacture and distribution of drugs and their components should be clarified and specific provisions should apply to different types of actors. This should not prevent the Member States from carrying out additional inspections when they believe them to be appropriate.

See the Directive 2011/62/EU of the European Parliament and of the Council.